The Maturing of Instant Payments

Our partner Trustly's account of expanding instant payments through RTP.

The Real Time Payments Network (RTP®) has gained steam in recent years due to its’ convenience, speed, finality, and 24/7 availability. Both merchants and consumers love the power of RTP® because of the numerous advantages it brings outside of just being “faster.” RTP® continues to push forward through the payments market as forecasts indicate its widespread usage and adoption from now through 2026.  

Taking a holistic view of faster payments is essential to understanding how it has evolved and become such a trailblazing force in today’s payment systems, especially with the release of FedNow coming  this July 20th. FedNow^SM is the new instant payment infrastructure created by the Federal Reserve and is expected to heavily impact the growing payments landscape, especially RTP®.  

Timeline of RTP® in the US

Faster payment infrastructure in the US is behind compared to the rest of the world, but this has been slowly changing over the past decade. Recently, there has been an uptick in the demand for faster payments and innovations within the space have continuously grown.  

Now, according to TCH¹, a privately run banking association and payments company that owns and operates the RTP® network, 62% of all US deposit accounts can accept RTP® payments, and the projected growth of RTP®  usage will hit a 7.8 billion increase in transaction volume in 2026 compared to numbers in 2022.  

PYMNTS research² also shows that 52% of US retailers already accept RTP® or plan to do so within the next three years. To further illustrate growth, TCH¹ reports that in 1Q23 there were 52 million transactions accounting for $25 billion. This was a 5% volume growth and an 8% value increase from 4Q22. It is evident that there is a steady demand for RTP® and faster payments in general, with no evidence of slowing down.  

Industries that Continue to Benefit from RTP®

Demand for the RTP® network’s ability to provide instant payments comes from the value its speed, always on accessibility, and irrevocability bring, such as:  

• Gaming/Sports Betting - Operators can enhance the player experience and loyalty by offering faster payouts on winning bets.
• Gig Work - Freelancers and gig workers can receive their pay instantly without waiting several days, allowing for a clearer picture of their finances and more efficient cash flow.
• Small Businesses and Online Retailers - Small businesses and online retailers can utilize RTP® to provide instant rebates and refunds to their customers. This helps to quickly alleviate any issues and remedy problems quickly.  
• Travel - Immediate payment solution for vouchers or refunds in the event of flight cancellations, delays, emergencies, etc., 24/7, which is especially beneficial since travel frequently occurs on weekends and holidays.  
• Insurance - Insurance companies can provide fast financial remediation through RTP® after a claim gets resolved. No one likes to wait days on end for money they need fast after a disaster or injury, so RTP® is a welcome advantage in this space.

These are just a few example applications. RTP® can integrate well with virtually any vertical that utilizes payments regularly. Within these industries, the immediate availability of funds from payments is crucial. RTP® improves the customer experience by providing merchants with the tools necessary to provide quick and deft solutions. No longer are consumers waiting for their payouts, merchants now have the capability to harness faster payment rails to provide the ultimate payout experience.
 
FinTech partnerships, such as the one between Trustly and Cross River, have been able to make faster fund settlement a reality for many merchants.  Benefits for both merchants and consumers include a better overview of their financial position, lower financial transaction costs, and improved cash flow.

FedNow's Launch in the US

With the release of FedNow³ just around the corner in July 2023, the push for instant payments adoption will increase significantly. Even though the US has been late to the game, instant payments will continue to grow, as evidenced by this new government-backed instant payments rail from the Fed.  

FedNow provides the ability to send funds back and forth between financial institutions, both low value transfers such as digital wallet disbursements, and high value transfers such as settlement service transfers.  

Trustly and Cross River have primarily utilized The Clearing House’s RTP® rail, as it is currently the only one available for use in the US. With FedNow’s release, Trustly and Cross River are ready to adapt to the changes FedNow will have for faster payments and its potential implications.  

The Impact of FedNow

After years of development from the Fed’s Faster Payments Task Force (FPTF), FedNow will arrive shortly. As mentioned in Forbes⁴, the Fed is well aware of the heavy demand from the public for instant payments.  

In the article, Ken Montgomery, FedNow’s program executive, states that the “benefits of instant payments are increasingly important to consumers and businesses” and that FedNow will act as a “springboard” for merchants and consumers alike. The release of FedNow will open the gates for many financial institutions to connect to an instant payments rail to fill the growing demand in the US, essentially increasing accessibility of instant payments to a wider audience.

How Faster Payments Changed the Market

The paradigm has slowly shifted as merchants and consumers utilize instant payments and see its benefits. Instant payments are now slowly becoming the norm and no longer the niche alternative. Quick, guaranteed access to funds has immense value, and instant payments has become a staple across various businesses.  

The FIS 2023 Global Payments Report⁵ projects that A2A payments powered by instant payments will grow to 11% of all e-commerce transaction value in the US by 2026. The report highlights just how impactful instant payment rails will be in the coming years, mentioning the growing number of merchants and retailers promoting Pay By Bank and other instant payment methods, especially with FedNow on the horizon.  

As instant payments has integrated through various apps and platforms, the expectation of fast, frictionless payments has risen. This is especially true when considering the fact that four out of five Americans show interest in faster payments⁶ and as many as 61% of Millennials are interested in receiving and delivering funds in real time.  

Many companies, banks, and credit unions have been clamoring to respond to this disruption of traditional payment methods. It’s becoming increasingly clear that instant payment alternatives have taken precedence over checks, transfers, and interchange fees from card processors.  

Stay Ahead with Faster Payments

Cross River has supported Trustly’s push into US markets to provide their clients faster transaction settlement options. Since the beginning of the partnership, Trustly and Cross River work hard to meet the growing demand for faster, instant, and better payment options across various industries.  

As FedNow's signals the start of a changing era in the payments ecosystem, Trustly and Cross River continue to work together to ensure that the growing demands of immediate money movement are met across the US. The partnership aims to make faster payments more accessible by continuing to scale RTP® usage and simultaneously making the Federal Reserve’s newest instant rail readily available.  

As thought leaders for faster payments, both Trustly and Cross River move forward to deliver the future of financial services⁷ for merchants and consumers across the nation.